New Product Development

Nonoy Niles
President
ACNielsen Australia

The importance of the new product development process can perhaps best be summarised in these quotes from the Chairman’s letter in the Annual Reports of two leading FMCG companies.

"A constant stream of innovative new products continues to build market share in core categories and fuel our growth. In 2002, 40% of Colgate’s sales came from new products introduced in the past five years." Colgate 2002 Annual Report.

"New products launched in the past three years now represent 32% of our net revenues...Our target is to hit 40% by the end of 2004..." Reckitt Benckiser 2002 Annual Report.

New products are the life blood of all companies, the essence of which Bill Gates of Microsoft dramatically expresses in the quote "My company is always three years away from extinction."

However, New Product Development is an area with significant inherent risk, as the consumer appeal for new formulations, features, and facets is often unknown or at best, least understood.

A core function of market research is to help marketers make better business decisions by minimising risks due to uncertainty. In this edition of Insights, we illustrate across a range of issues how market research goes about achieving this goal. We explore not only new launches but extensions to existing franchises. In many markets most of the new product activity are innovations, and leverage off existing brands rather than brand new ideas. Here, much of the risk is more down to cannibalisation of the parent when consumers start to switch rather than to augment purchasing. Furthermore, the reallocation of marketing support resources from the parent can further impact the parent’s overall performance if advertising and promotion is cut back to support the extensions.

It is not only in the development side that market research can help, timely and actionable information about the dynamics of the launch period can either keep a brand’s introduction on track or help to better re-align and re-direct it if things do not go according to the original plan.

At ACNielsen, our combination of diagnostic and predictive services augmented and enhanced by the market tracking retail and consumer panels provides a powerful set of tools to help maximise the success of new products, prior, during and after launch.